Financial controls

Synergy includes a default set of standard financial settings which are used for calculation controls in the project financials reporting. Consider seeking advice from an accountant to get help to determine the figures to be used in financial controls.

Setup required before use

Who can use it?

Where is it?

n/a

Director Access

System Administrator

Settings > Financial > Financial controls

Tip: These are the business-wide standard for the company / organization. At a staff record level the values for units, super, availability and utilization factor can be changed.

What are the financial controls?

Setup the organization-wide (company or practice) defaults that will be applied to the entire Synergy database for calculating the project financials and reporting. These settings are used to calculate the actual cost values in Synergy. The effective date is used to define what date the newly updated settings will take effect from.

Overhead factor: The overhead factor is the cost of running office where the staff member work, and is set to cover the office costs when calculating actual cost and profit in Synergy. Some staff will have a cheaper overhead if they work in a remote office or from home. Mark up / down the overhead factor at a staff record level to reflect that working in a remote office is cheaper than the primary office. *This feature is available with the Synergy Business or Enterprise products.*

Target margin: The target margin is the margin goal above the break-even point the organization plans to take on work after the overhead and costs have been taken into account.

Define the 'staff record' level standard values that will default onto each new staff records created in Synergy. These defaults can be changed on the staff record once created if required.

Hours per week - The standard number of hours per week that staff are expected to be working.

Retirement fund % - The standard retirement fund percentage for new staff. e.g. Percentage for a Superannuation fund (Aus), Kiwi Saver (NZ), pension (UK) and on-costs (USA). *This feature is available with the Synergy Business or Enterprise products.*

Availability factor - The percentage of time each staff member is available to be in the office, less any annual / holiday leave, public holiday leave, medical / sick leave, and any other leave types that apply. *This feature is available with the Synergy Business or enterprise products.*

Utilization factor - The percentage % of the time a staff member should be working on billable tasks. *This feature is available with the Synergy Business or Enterprise products.*

Why use financial controls?

Set the target margin and operating overhead factor for the organization, and define the default factors applied to new staff records in Synergy.

Settings available

This is the standard number of hours that each staff member works each week. This is the company standard number of hours and will default onto each new staff record created in Synergy. The default value can be adjusted if required. e.g. Staff work an agreed 37.5 hours or 40 hours each week.

Tip: Changes to this setting will not update any existing staff records. Updates will only be applied to new staff records created after the change is saved.

Target margin is a % added above the break-even point to determine target profitability levels. This will add the % margin above the break-even 'overhead rate' to determine the target charge-out rate for staff. The profit margin will also calculate a standard cost based on the nominated charge-out rate less target margin.

Tip: If the change is 'future dated' using the effective date (e.g. the effective date is tomorrow), then you will not see an update of the Overhead (OH) cost on the staff record until that future date (e.g. tomorrow).

This is the default retirement fund or pension fund percentage that the employer is paying into the staff members fund. In many countries, this is a levy defined by the government, and that default % can be entered here to be used on new staff records that are created. Changing the levy % here will not update any existing staff records.

E.g. In Australia, this is known as the superannuation levy rate (SGC) and the Australian government has defined the super levy rate as 9.5% (from the 1st July 2014). Update this field if the government changes the percentage value that employers must contribute to the retirement/pension fund for each staff member.

In the UK this is known as Pension, New Zealand this is Kiwi Saver, and in the USA this is known as On-costs or the 401K.

*This feature is available with the Synergy Business or Enterprise products.*

Availability factor is the percentage of a year that employees are available for work. This creates the default % for the entire organization and is applied to all new staff records when they are created. When this setting is changed any existing staff records are not updated.

Availability factor works out that out of the 52 weeks in the year, that a staff member may only work 43 weeks after deducting the time for holiday / annual leave or medical/sick leave.

*This feature is available with the Synergy Business or Enterprise products.*

Leave types calculation example

There are 4 weeks of annual leave (holiday leave) provided to each staff member per calendar leave. The staff member is also entitled to apply for up to 10 medical or sick days per year. The government also has several days throughout the year as public holidays where your staff must be paid for the day off. Public holiday days are different by country and state/region. Please consult your local government or state website for a yearly public holiday listing.

The availability calculation below is based on a number of weeks per year that the staff member is unavailable. A 'week' refers to a business working week that most of your staff are in the office. In this sense, a business week is 5 days - not the normal 7 day week, as offices are not open with all staff working on weekends.

Leave type

# of days per year

Weeks per year

Holiday / annual leave

20

4

Public / holidays

10

2

Medical / sick leave

10

2

Total leave

40 days

8 working weeks

Availability calculation

The week's available needs to be calculated here to determine the availability factor. This is the total weeks per year less the number of leave weeks per year.

The availability factor can then be calculated as the ((Weeks available per year / Weeks per year) x100). This is then the default availability to be applied to new full time or equivalent (FTE) staff records that are created in Synergy. This availability factor can be changed on the staff record when required to be different from the default setting.

Details

Total

Weeks per year

52

Total leave weeks

8

Weeks available

44

Availability factor

((Weeks available / weeks per year) x 100)

84.61%

Tip: Any changes made to this availability factor setting will not update the staff records. It will affect only new staff records created.

The utilization factor is a percentage of staff time of which they are expected to be completing billable tasks. This is the target proportion of time for each staff members time that should be billable against projects (vs non-billable work).

The value entered here is the system default % value, and is applied to new staff records when created. Each staff record can be manually adjusted to an alternate value if required. Changes made to this utilization factor value will not update the existing staff records.

*This feature is available with the Synergy Business or Enterprise products.*

The majority of AEC practices recover the cost of running the business by having their staff complete billable project tasks. The overhead factor allows you to determine the 'raw' cost of each staff member and how much it needs to be marked up by to cover the business overheads. The chargeable value set would then have the target margin % added on top of this figure to ensure that your organization is making a profit.

*This feature is available with the Synergy Business or Enterprise products.*

Overhead calculations

The organization overhead factor should be reviewed every six to twelve months. Updating the overhead factor will update all of the staff actual costs and charge-out rates 'standard cost per hour'.

Before we can report on the cost of billable work you need to make sure the following items have already been entered in Synergy:

Create staff records - All currently employed staff have been entered in Synergy.

Enter staff salaries - The staff salary details must have been entered on each staff record in Synergy.

Set the 'utilization' factor - Update the default utilization factor for any non-billable staff. i.e. Administration type staff are normally set to 0% as they never complete billable work. This needs to be changed on the staff record level to be different from the organization default defined here in financial controls.

The table below shows the list of staff that are currently employed at the organization 'Fabrikam'. The salary type selected for each staff member is not important here, and their salaries are all summed as a 'package' (salary per year + extras + retirement / pension fund).

The utilization percentage varies for each staff member based on the type of work that they complete. In the table below Billy-Bob is set to 0% utilization as he is an administrative staff member, and he never completes any billable work. Other staff below also have lower utilization factors if they have other internal office tasks to complete along with their billable work.

Formula: (Package $ x Utilization %) = Cost of billable work

The formula above is calculated for each staff member currently employed. The 'cost of billable work' for each staff member is then summed and taken to step 2.

Two figures are required to calculate the overhead factor. The first figure is the 'annual practice cost (excluding profit)' and this cost is normally obtained from your accountant. This value includes all staff salary package values (utilized and non-utilized staff salaries - all staff), and costs for operating an office like rent, phones, computers, insurances etc.

The accountant will obtain this value from the profit and loss statement, and the value represents "total expense for the practice - any expense reimbursable from clients". This means that any expenses that are on-charged to clients via the projects are excluded from the overall running costs of the business, as you will recover the money for these expenses via the project invoicing in Synergy.

The second figure required is the 'total cost for all staff to complete billable work' (utilized work) which was worked out in step 1.

The result of this example is an overhead factor of 2.53. This value can be entered into Synergy financial controls, or you can enter another value that has been suggested by your accountant. In many organizations, the overhead factor is set up to be between 1.8 to 2.5. The practice overhead is rounded up to 2 decimal places.

When Jill is charged out at $90 per hour, an actual profit of $14.10 is recorded per hour against the project. ($90 - $75.90 = $14.10 profit)

If a transaction for Jill is written off, then there will be a loss recorded of $75.90 against the project.

Tips:

When the overhead factor is changed in financial controls, all the staff records are also updated to reflect a new staff-level overhead cost.

If you change the overhead factor today but set a future dated effective date (i.e. tomorrow), then you won't see the newly updated overhead costs in the staff records until the new effective date (i.e. until tomorrow).

If you have multiple office locations then use this feature to set the 'primary office overhead factor'. On the staff record, you can mark up / down the overhead rate for people that work in other offices.

When updating any of the organization-wide financial settings an effective date must be entered. The effective date is the start date for when these new financial controls rules will be applied in Synergy. The organization-wide settings that use the effective date are: 'overhead factor' and 'target margin'. The effective date entered must be after the last entered timesheet or expense. Type the required effective date, or select it from the drop-down calendar shown.

Rollback is used to restore a previous set of financial control rules, which are controlled by the effective date field. This allows you to restore a previous set of organization-wide financial controls, when changes to the 'overhead factor' or 'target margin' have been made by mistake.

Go to: Settings > Financial > Financial controls.

Check the organization-wide financial controls for 'target margin' and ' overhead factor' If the values in the top table are incorrect, then review the top row in the history table. The top row is the group of settings that will be restored by the rollback option.

To roll back to the top row group of settings click the '...' button in the top right, and select 'rollback.

The fields at the top of the screen are refreshed to show the old settings reapplied. The changes are made to re-apply the old history row to both the staff and organization-wide settings.

Columns available

The 'history panel' shows the previously saved settings for the financial controls in Synergy. When the rollback action is used it will restore the top row of settings for financial controls shown in the history panel.

Effective date: The end date of the period that the financial controls were applied against. The database is created with a default row where the effective date is the date you created your Synergy organization. This row cannot be changed. When the settings are updated a new row is saved with the 'effective date' for the previous set of financial controls settings shown here. This allows you to track a date range for these settings to see what defaults were applied to staff records in each period.

Hours per week: Standard number of staff working hours per week. The default for new staff records created in the effective date range shown.

Superannuation / On-costs / Kiwi Saver / Pension: Super levy percentage default for all new staff records (Australia). Also known as pension percentage in the United Kingdom, or Kiwi Saver percentage in New Zealand, or On-Costs pension fund percentage (401K) in the USA. The default for new staff records created in the effective date range shown. *This feature is available with the SynergyBusiness or Enterprise products.*

Availability factor: Percentage of working days, fewer leave types (annual or sick). The default for new staff records created in the effective date range shown. *This feature is available with the Synergy Business or Enterprise products.*

Utilization factor: Target percentage of time staff are working on project billable tasks. The default for new staff records created in the effective date range shown. *This feature is available with the Synergy Business or Enterprise products.*

Overhead factor: The total cost of running your business. Use the calculator (recommended). *This feature is available with the Synergy Business or Enterprise products.*